Massachusetts state tax collections skyrocket for April

BOSTON – State tax collections soared last month, partly because of people taking profits on stocks last year and paying state capital gains taxes.

Tax collections rose to $2.505 billion in April, up $758 million from April of last year and up $587 million over projections for the month, according to the Massachusetts Department of Revenue.

In a sign of the growing economy, state Revenue Commissioner Navjeet K. Bal on Tuesday announced that for the fiscal year to date, tax collections total $16.860 billion, up $1.927 billion, or 12.9 percent, from last year, and $732 million more than projections. The fiscal year ends June 30.

“The strong April collection was largely due to payments with income tax returns and extensions generated by larger than expected investment–related income which produced higher than forecast revenues from taxes due on interest and dividends and capital gains,” Bal said. “Monthly withholding also registered above benchmark, which is a sign of continuing economic recovery.”

Bal said that investment gains can be hard to predict.

“Capital gains collections are volatile, as we have seen most recently in FY09 when capital gains dropped $1.7 billion due to the economic decline of 2008,” Bal said. “For that reason, we should not assume continued revenue growth at this rate. We will examine tax returns filed this fall by those taxpayers who now have extensions to further probe the reasons for this dramatic increase, but it is clear that much of it stems from taxpayers who decided to cash in investments in calendar year 2010, and who are now paying taxes on those realized gains.”